Manufacturer: a person or company that makes goods for sale.
Supplier: supplier is the provider of the product or service coming from the manufacturer themselves
Minimimum Order Quantity (MOQ) : A requirement specifies the lowest quantity of a certain product that a supplier is willing to sell. If the importer cannot reach the MOQ requirement, then the supplier is not willing to enter production
A request for quotation (RFQ): is a standard business process whose purpose is to invite suppliers into a bidding process to bid on specific products or services. RFQ generally means the same thing as IFB (Invitation For Bid).
TT: Telegraphic Transfer a bank transfer either placed through your online bank or through a branch
Unit: A single item
In order to start an online business, you need two things, a product idea and supply. If you already have your product idea the next step is finding the perfect supplier. Thanks to the internet, it has never been easier to find a manufacturing or wholesaling partner halfway around the world, however sourcing your products from overseas can still seem like a daunting task for new online entrepreneurs. It is important to find a good supplier as your product can only be as good as the people who supply it and finding the right supplier can be a game changer in the e-commerce business.
Alibaba.com and Aliexpress amongst other sourcing platforms like Global Sources, and Made-in-China.com, are well known marketplaces amongst businesses worldwide. Although they have very different business models both websites are owned by the Alibaba Group based in Hangzhou, China. Majority of their suppliers and manufactures on the marketplace are also from china, however there are suppliers and manufactures from other parts of the world.
My first ever experience with Alibaba was when I decided I wanted to have branded boxes for our packaging for Korrine Sky Intimates. I contacted several UK based manufactures and the prices and their MOQ they quoted just did not make sense for our margins. So I ventured to Alibaba, it was a complete shoot in the dark as I had no idea what I was doing or looking for. However the experience ended up a very pleasant one. I’ve included my packaging vendor in our eCommerce directory if you are looking for quality affordable packaging. I would say anyone who has never used Ali Baba before it can be intimidating and off putting but if you find a good supplier / manufacturer it can be a great experience.
It is risky to import products from China. Anything from small details that are incorrect in the final product to outright fraud is a possibility of this business. This costs businesses money, and while some issues can be overlooked, others force businesses into bankruptcy.
Thousands of suppliers are listed on these sites, and you can streamline your search and increase the number of legitimate sources by filtering results for only those entries labelled as “gold member,” “verified supplier,” “onsite supplier,” or “accredited supplier.”
Be aware that verified suppliers at these sites may only mean that the companies are verified to exist; it does not necessarily mean that their reputation, production capability, or quality have been verified (for example, a gold member at Alibaba is a paid status).
Like anything there are advantages and disadvantages from importing and sourcing your products from china:
- Lower manufacturing costs
- Suppliers are (generally) much more open to working with smaller businesses and providing smaller quantities
- High number of suppliers to choose from
- For many products, Asia might be the only place that produces the item
- Perceived lower quality from customers
- Ethical issues due to the poor conditions some of the environments the workers work in
- (Usually) lower manufacturing and labour standards
- Almost no intellectual property protection
- Payment security can be low
- Language and communication barrier can be difficult to overcome
- Difficult/costly to verify manufacturer and visit on-site
- Longer shipping time
- Cultural differences in business practices
- Product importation and customs clearance
- Lower level of payment security and recourse
- Possibility that you may be selling similar products to other boutiques
· Is a business to business marketplace that connects manufacturers – mainly Chinese – with overseas buyers
· Is a more of a business to customer marketplace (similar to ebay) although there are some vendors that do business to business
· No built-in shopping cart system, the order terms are negotiated and confirmed via email or the built-in chat function.
· There is often no minimum order
· No transaction fees or commissions are paid to Alibaba.com. Their main revenue source is the “Gold Supplier” membership fee paid by suppliers. Alibaba verifies that each Gold Supplier is a legally registered company. However, this is not a guarantee of quality products.
· Focused on small volume order of “ready made” products and therefor more suitable for smaller businesses that can’t afford to buy goods in bulk
· Focused on “made to order” goods. In practice, this means that suppliers on Alibaba don’t advertise “ready-made” products but rather manufacture products based on the specifications provided by the buyer. The suppliers are basically listing reference products.
· The supplier lists a product and prices for different quantities. It’s usually not up for negotiation. Prices on Aliexpress are higher compared to larger quantity orders from an Alibaba supplier.
· There is usually a high MOQ requirement which is often too much for small businesses that don’t have fairly large sales volumes.
· The prices are fixed on aliexpress
· There are no fixed prices on Alibaba everything is quoted from scratch to a various degree. You send your product specifications (colours, dimensions, materials, certification requirements, etc.), the delivery terms and the quantity you want to buy; then the supplier gets back to you with a price.
We recommend Alibaba.com if…
- You can buy a few hundred units of each product
- You want to import custom designed products
- You want to import products with your own logo print or custom product packaging
- Your products are very price sensitive
We recommend Aliexpress.com if…
- You buy 10 – 100 units per product
- Custom design, logo printing and custom product packaging are not important to you
- Your products are not that price sensitive
- You need your products right away
How to ask for a quotation (RFQ)
Asking for a quotation AliExpress or Alibaba can be daunting but I promise you it is fairly easy, but you want to pay attention to how you structure your Email.
Here are some things you might consider including in the Email:
- Minimum order quantity (MOQ)– If the minimum quantity is larger than what you want or can afford, you are going to have to ask the supplier if he is willing to renegotiate the minimum quantity. It’s also a good idea to inform them of your budget. You should know that, as a general rule, MOQ is negotiable!
- Sample prices –Like we mentioned before, samples are important to determine the quality of the product. Suppliers receive a lot of petitions and tend to have a wide range of prices for their samples. Some, offer discounts or will even give you samples for free depending on the supplier.
- Product price –Knowing the price of each unit is one of the most important questions you should make when buying wholesale. In most cases you will be given a price range however knowing the exact price will help you negotiate better.
- Production time –Especially if time is an issue for you, make sure to ask how long they will take to make your order ready.
Here you have a template you can copy and paste to contact the different sellers. All you have to do is edit the sections marked in bold and then copy it onto the contact page of supplier you are interested in. Here it is:
My name is NAME and I work for NAME OF THE COMPANY. I am interested in placing an order for your NAME OF THE PRODUCT product. Before, I have a few questions:
What is your minimum order quantity?
What is your cost per unit and at what order volume do you offer quantity discounts?
What are the payment terms for a new customer?
I would also like to order a sample of NAME OF THE PRODUCT before placing a full order. Can you please send me the cost for the sample including shipping to.
NAME and COMPANY WEBSITE
After you’ve negotiated your price and MOQ, you probably want to know how you can pay the supplier. There are several methods in which you can pay the supplier, each have their pros and cons and some are safer than others.
Let's take a look at the most common payment options below and the associated risk level to you as the buyer:
Upfront TT (Bank Transfer)
Risk Level For Buyer: Risky
With a bank transfer, the supplier will receive full payment before production starts. This payment method bears a high level of risk there is little if any recourse to get your money back if something goes wrong.
Letter of Credit
Risk Level For Buyer: Fairly Safe
A Letter of credit is fairly safe for both parties, however a letter of credit carries some complex procedures and is generally only recommended for larger purchases (£20,000 and above).
Risk Level For Buyer: Very Risky
A risky payment method for the buyer that's not recommended when it comes to paying suppliers if the payment is not protected by escrow. Western Union generally should only be used when dealing with people you know very well.
Risk Level For Buyer: Fairly Safe
Paypal is a popular payment method for buyers as it presents a much lower risk, ease of use and generally pretty good buyer protection. Although it's a popular option with buyers, it's less popular with suppliers due to difficulties in withdrawing money, high tax rates and potential charge backs from less than honest buyers.
Risk Level For Buyer: Fairly Safe
When using an Escrow service, the buyer's money is held by a 3rd party and is only paid to the supplier after the buyer confirms satisfactory delivery of their order. Escrow is a fairly safe payment method for buying and selling online because Escrow protects both the buyer and supplier.
In my experience with Chinese suppliers I have always opted to pay 50% pre-production and once the item has been manufactured I would either request a sample or depending on my relationship with the supplier once the item has been made and they have sent production photos or videos I would pay the rest via paypal.
Tips to safeguard yourself when buying on aliexpress or Alibaba
- Verify sellers
- Ask questions and follow-up
- Request photos during production
- Get samples
Shopping wholesale or manufacturing in china can be scary but if you follow our advice and use your instinct it can be a great experience. Make sure you speak to as many suppliers as you can and ask questions!
If you need a list of verified suppliers from the UK and China check out our eCommerce Directory!